3/29/2012

IMF's man in Greece under fire over minimum wage cuts

A (largely Greek) audience challenged the IMF mission chief Poul Thomson on the extent of the austerity measures in Greece at a panel debate at the London School of Economics last night.

In response to a question on increased suicide rates in Greece since the austerity measures, Thomson said he found the figures ‘alarming’ but reiterated that Greece’s minimum wage must be cut by at least 22%.

This, he argued would stop the jobless, who make up 40% of the population, being outpriced of the labour market.

Also on the panel was Moritz Kraemer, head analyst of EMEA credit ratings at Standard & Poor’s. His team, he said, had cut their rating on the country’s debt since the second private sector haircut as they expected further debt restructuring.

‘Greece hasn’t avoided default,’ said Kraemer. ‘Whether you want to call it a voluntary default or not, Greece has defaulted in that holders will not receive their full payment.’

Greece’s 110 billion euro bailout from the European Commission and the European Union, is the largest received by any country ever said Thomson.

Yet head economist at FTI Economics and co-panelist, Vicky Pryce, said Greece needed further ‘sweeteners’ alongside the IMF restructuring reforms.

‘Greeks like conspiracy theories,’ said Pryce. ‘There is the idea in Greece that some countries want to take Greek assets cheaply.’

Kraemer said rising populist sentiment, together with tax evasion and unemployment, was a major factor barring economic growth prospects in Greece.

None of the panelists advocated a Greek exit from the eurozone as not only would a return to the Drachma wipe out all of Greek savings and bankrupt companies, it would also make Greece's return to the debt market even more difficult than under the Troika programme.

Protestors greeted the IMF’s head of the Greek restructuring process at the university with the words ‘Paul Thomson get out, we don’t want your bailout!